Aggressive eBay is moving beyond collectibles

Q. I bought shares of eBay at the height of the tech boom and have hung onto them this long. Should I keep holding? What's your opinion of the company?

A. While most technology and Internet companies continue to struggle financially, this online auctioneer's earnings more than doubled in the second quarter. In addition, its overseas operations have increased to one-fourth of its revenues.

Growing numbers of customers are turning to its Web site to purchase items that now go well beyond collectibles to include cars, computers, clothing, vitamins and even heavy machinery.

Though it has been exceeding earnings expectations, the company's relatively conservative estimates for near-term growth have kept investors from warmly embracing its stock. There's also the question of what the firm's stock valuation should actually be in light of its acquisitions.

Shares of eBay Inc. (EBAY) are down 14 percent this year, following last year's 103 percent gain.

Management continues to be aggressive, buying PayPal Inc., a leader in the online payment market, in a $1.5 billion all-stock transaction expected to close by year's end. That deal must receive antitrust clearance. PayPal, which has 12.2 million personal accounts and 3.2 million business accounts, looks like a sound strategic move.

After making its debut as an auction-only site back in 1995, eBay has lately been offering sellers fixed-price alternatives. It recently gave the option of selling items with no auction. Either the product sells for the listed price, or not at all, an arrangement that appeals to traditional retailers offering products on eBay.

In addition, the eBay's "Buy It Now" plan, which accounts for one-third of items listed, permits sellers to list an item at a set price, with the sale ending if someone offers to pay that price. If someone enters a bid below that price, the "Buy It Now" option is canceled and the sale becomes a regular auction. There is also instant sale of items through Half.com, a site that eBay acquired in 2000.

Shares of eBay currently receive a solid "buy" rating from the analysts who track them, according to the Boston-based First Call research firm. That consists of seven "strong buys," four "buys" and four "holds."

Earnings for eBay are projected to increase 37 percent this year, versus the 35 percent expected for the consumer services industry.

The five-year annualized growth forecast is 50 percent for the company and 16 percent industry-wide.

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Andrew Leckey answers questions Sunday in Business and Tuesday in Your Money. Address inquiries to Andrew Leckey, P.M.B. 184, 369-B Third St., San Rafael, Calif. 94901-3581, or by e-mail at andrewinv@aol.com.